U.S markets close out a low volatility week with an important April jobs report on Friday. We seem to be in a Teflon market where both good and bad news alike just slide off the market. This either a Goldilocks market or a Teflon market.

Larry Peruzzi, Managing Director

The VIX index (good indication of volatility) hit a 10 year low on Monday at 10.11. In fact many have noted that the VIX trading curve looks very similar to 2007. In another indication of the low volatility the S&P 500 has not had a move of more than 20 bps over the last 7 sessions. Not that there has been a lack of new, quite the contrary between French elections, possible affordable health care plan overturned, North Korea, Apple hitting an all-time high, the Fed’s non actions and earnings investors have had plenty to digest. Q1 earning season is nearing an end with 78% of earnings reports beating forecast and 63% beating sales forecast. Wednesday the Fed decided not to raise rates and the statement was slightly more hawkish than we were expecting with the Fed suggesting it could still raise interest rates at its next meeting on June 14th. Market expectations for a rate hike next month jumped to 75% from 60%, but much of this is contingent on a rebound in employment growth in April and May. Thursday was a great example of sector movements canceling each other out as financial stocks gained offsetting losses in telecom and energy shares as the price of crude oil fell below $45 a barrel. The question we all have is how long can this keep going?

Looking ahead to next week fist on the docket will be follow through to Friday’s job report and reaction both in Europe and the U.S to France’s presidential elections on Sunday. Polls indicate Emmanuel Macron has a 20 point lead on Marie LePen, but U.S and U.K voters are both well aware of how inaccurate polls can be lately. A Le Pen victory certainly would create some volatility, while Macron would be viewed as more of a status quo.

Cheap oil is coming back, with WTI crude at its lowest level in 13 months. We could see some continued pressure in the energy sector next week. Keep an eye on Venezuela, a country that is nearly 100% dependent on oil revenue. Crude’s 2-year slide, as well as disastrous political decisions, has the country on the verge of collapse. This week’s EIA number added further importance. Japan will also return to work after three days of holidays.

Economic data is back loaded next week, with April PPI reading and jobless claims on Thursday and April CPI, April retail sales, Business inventories and Michigan sentiment closing out the week on Friday. Fed wise governors Bullard, Mester, Kashkari, Rosengren, Dudley, Evans, and Harker, all give speeches, but make no mistake about it; The Fed is looking at just 2 things: Jobs and inflation. Recently, both of those have not shown to be either hawkish or dovish. Washington will not be lacking any drama as the Senate GOP looks ready to overlook the House Obamacare repeal bill and write its own. If they find sometime a budget is needed to avoid another government shutdown later this year. So call it a Goldilocks market or a Teflon market but until volatility returns brokers will continue to see low trading volumes. This will certainly result in lower earnings for the brokers in Q2.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans. Larry’s experience and best execution perspective stems from his sitting on ‘both sides of the aisle.’ For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group.